Grain Pool accused of price discounting

27 Apr, 2005 08:45 PM

The gloves are off in a war of words between two major players in the WA grain industry.

GRAIN Pool's (GPPL) claim earlier this year that it been undercut by Grain Licencing Authority (GLA) licences has been met by new claims that GPPL itself discounted prices to win markets.

The claim of discounting, labelled as outrageous by GPPL, is one of many levelled against GPPL through a Brooks Grain submission in response to the RSM Bird Cameron report into the GLA.

"The Grain Pool wins business by heavily discounting prices to markets like Japan and Korea," the Brooks submission says.

Brooks Grain, owned by international grain trader Glencore, also stated in its submission that GPPL did not capture freight gains for WA growers and failed to gain any overseas market premiums.

"These sweeping statements are outrageous, offered without any supporting evidence, and GPPL categorically denies them," GPPL senior trading manager Josh Roberts said.

He said GPPL was able to provide premiums to growers, and in its own submission explained how GLA canola licences earlier this year undermined GPPL premiums in Pakistan by up to US$17t.

Grain Pool has the single desk export permit for bulk lupin, barley and canola shipments, and the GLA was set up under pressure from National Competition Policy (NCP) to allow special export licences outside GPPL.

Agriculture Minister Kim Chance commissioned the RSM Bird Cameron review into the GLA, which found there was a net benefit of $2.88m to growers.

GPPL claimed the report was flawed because it used out of date pool estimates that would have accounted for most of the benefit.

Industry groups were given an opportunity to respond to the GLA report.

Submissions closed two weeks ago.

Brooks Grain, the main recipient of GLA licences, also estimated GPPL made a profit from special licence holders by swapping fees and higher freight charges, as well as high administration and operation costs.

Mr Roberts said GPPL had swapped Brooks' grain with GPPL grain in upcountry silos and at port, and sold the company grain to top up its vessel because it didn't have enough from growers.

"If Brooks is complaining GPPL made a profit we can only say we are proud we did," Mr Roberts said.

"Profits go direct to growers in the pool, and not to an international trader like Glencore."

Brooks Grain WA manager Phil Brooks claimed the 339,736t sold by special licences from the 03-04 crop saved GPPL the cost of marketing the grain in what turned out to be record crop.

"As we now know, GPPL struggled to market such a large crop and to overcome their inadequacies with the task at hand," Mr Brooks said.

"They resorted to selling large quantities to international trading houses that could place the grain."

Mr Roberts said GPPL didn't need help from Glencore to market the grain and could do a better job without special licence holders undermining GPPL market premiums for growers.

"We are comfortable we can do the job without Glencore's help," he said.

Meanwhile Mr Brooks said the RSM Bird Cameron report was right to dismiss GPPL's claim of a foreign exchange loss due to GLA licences flowing back into the pools.

He said this was due to the difficulty of assessing the crop size, which in 03-04 was 190pc greater than 02-03, and the fluctuating commodity prices which could vary by 20pc in a short time.

However Mr Roberts said that of the 385,000t of feed barley licences for 04-05, only 165,000t were bought, with the other 220,000t flowing back into the pool.

He said at US$125t the extra hedging on the 220,000t at the end of the harvest was US$27.5m, when the Australian dollar had risen significantly.

"Every grower in the barley pool was worse off by about $2t as a result of GLA licence holders not acquiring the tonnage that they had promised when they obtained their licences," Mr Roberts said.

"Our submission to the Agriculture Minister regarding the RSM report states that contrary to the report's finding, growers of WA are significantly worse off than before the advent of the GLA."

However the Brooks submission says the benefits of the GLA to growers was more than the $2.88m identified in the report, due to increased operating and administration costs of more than $2.5m claimed by GPPL.



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